31 July 2019

How will Brexit affect the economy?

The exchange rate of the British pound has plummeted amid fears of a hard Brexit. At the same time share prices on the London Stock Exchange are relatively robust. Commentators from different countries have widely varying views on Brexit's impact on the economy.

Johnson gambling for high stakes

Confidence in the British economy is dwindling, the Wiener Zeitung notes:

“If you look at the pound's exchange rate these days, things don't look good for Britain. It's slowly dawning on the market players that a hard Brexit has become very likely with Boris Johnson as prime minister. Johnson hopes he can blackmail the EU with this prospect. The fact is, however, that it was the Conservative government under Theresa May that negotiated the withdrawal agreement with Brussels. Why should the deal now be null and void just because someone else has moved into 10 Downing Street? ... Nevertheless: a few cosmetic changes should be made to make sure that Johnson can't blame an 'intransigent' and 'obstinate' EU for the consequences of Brexit.”

Clarity will unleash investment

The current weakness of the pound shouldn't cause too much concern, The Times believes:

“Today's devaluation should be understood as part of the rebalancing that the economy must undergo as a result of Britain's exit from the European Union. ... The falling pound should entice investment back into the economy by making British assets cheap. The reality is that investment is unlikely to pick up while Brexit is unresolved. The good news for Mr Johnson, however, is that there is plenty of pent-up investment waiting to be unleashed once businesses have clarity on the future trading relationship with the EU. That will deliver a boost to the economy and to sterling.”

Tomatoes will go up in price

Brexit will have a direct impact on consumption, Gazeta Wyborcza predicts:

“Additional controls in the ports and the roads that lead to them could cause huge traffic jams. That would stop the flow of trade. Britain imports almost 30 percent of its food from the EU. Although supermarkets can stock up on some products, not all goods can be bought in advance. Fresh fruit and vegetables can't, meaning that prices for these products will no doubt rise. While the government is saying that Brexit itself won't lead to empty shelves in stores, panic among consumers could bring about just such a situation.”